Technical analysis vs fundamental analysis
Having been in markets for over a decade, never have so many people reached out to seek understanding of how technical analysis in markets work. I thought to myself why is technical and not fundamental analysis hogging all the attention like usual.
Answer looked simple with reasons like they are new to market or greed has overpowered rationality or they seek to learn something new. However, it feels sad to say that only reason maximum people are interested is because it looks easier than fundamental analysis. Learn some charts, draw some lines , interpret some levels and we are done.
Sorry Joe, market ain’t your mama. Technical analysis is as subjective as it’s counterpart. Both suffer from people interpreting too much or too little from data in front of us. It’s not just price and volume, it’s more than that. Deep down the devil will tell you psychology of participants and their levels of accumulation and their reaction to news and events. All in that one chart, but no indicator reading will tell you how to read this. You will , someday figure it.
So, is technical analysis
Easy? Important?better than fundamental analysis?
No ,technical analysis is just like any other art you learn. It will take its time. You will go through phases of
- Starting out
2. Wow this awesomeness
3. I know everything
4. Everything is falling apart
5. Ok, so it’s done this way. Let’s try
It is important, technical analysis are as important as fundamental analysis especially in assets where there is a history of price and volume movement. Remember, history repeats, patterns repeat. Our greed is an immortal animal . Just learn to observe, aim, shoot and trophy can be yours. However, where price discovery by market and participation by a sizeable number has not happened, it helps to be cautious. In such cases, fundamental view like cash flow, asset block etc should be given importance.
Is it better than fundamental analysis, no I don’t think you can compare two school subjects. It’s about where your comfort, interest and advantage lie.
Frankly, both of these streams of research move hand in hand for me. A good company you find ahead of markets will only find its real price when large number of buyers seek to buy it. They propel it hire. In case it’s not discovered, it will languish like many others. Similarly, a company increasing without any change in basics or poor fundamentals might enjoy a good upmove but will crash and burn faster when ever bulls decide to stop or pause.
Apt I will is to keep in finding good companies and enter them when you see some increase in volume and delivery percentage. This might help reduce your holding time, on the other side a growing sector can be studied for bigger volumes, mutual fund entries and more. This will only display that big people and you are usually on same side. Must be relieved? Right?